Hi Suma,
Let's talk first about Pfizer.
Their PE is down around 11 or 12, depending on the daily change in the price of the stock. Their growth rate is only roughly half of their PE, so to consider an investment in Pfizer, a potential investor should be looking at PFE as a value investment, not a growth investment. With the PE down around 11, this is at or very near the historic low for PFE, which (to me) represents a rare buying opportunity based on value measures. (This presumes that one has enough time remaining in one's life to allow for PFE's various multiples and ratios to recover to historic norms, for both PFE and for the pharmaceutical industry as a whole.)
Currently, PFE has roughly $23B in its cash coffers, not counting the roughly $16.6B that they get from J&J for the sale of the consumer healthcare division. Of the $16.6B, they get to keep maybe $13B or $14B after taxes and sale/transfer expenses. They've already announced that they intend to use the proceeds from the sale on a stock buyback (currently stated as about $17B, meaning that some money will come from the coffers to reach $17B in total). The buybacks will occur in stages throughout 2006, and are expected to be completed in 2007. The buybacks should be sufficient (give or take a little) to offset the revenues and earnings lost in the sale of the consumer unit, so don't look for anything positive in the stock price from this sale until at least 2008 (again, give or take). Whatever remains of the $23B is an ample war chest to fund R&D or make acquisitions, probably the best war chest in the industry.
On the upside, Pfizer has a plethora of new drugs at various stages of development and approval somewhere within their pipeline for new drugs. Most certainly they are way, way ahead of any competitors in terms of the sheer numbers of new drugs making their way to market. Exhubera (sp??) is a new drug for diabetics. Champix is intended to help people quit smoking. And Sutent is another good prospect, this one in the fight against cancer.
On the downside, sales of Lipitor may crater because Merck's exclusivity on Zocor will expire, as will B-M's Pravachol. As the generic versions of these drugs enter the marketplace, sales of Lipitor may suffer as doctor's prescribe the much cheaper generics to their patients. Sales of other drugs might also come under pressure. So, not everything is fine and dandy. They win some, and they lose some.
Overall, PFE should do very well into 2008 and 2009. Certainly, they are the premier drug company to be investing in at the moment.
Now, let's take a look at Suma.
I glanced at your profile, and I see you're worried about the viability of your own future, presumably based on your age. I'm guessing from your post that you fear you may have insufficient time remaining in your life to wait for the price of PFE stock to recover.
Well, here's the questions that you have to ask yourself.
Why did you buy PFE in the first place? Were the proceeds intended for your use, or for the use of your heirs? If the answer is that the proceeds are for your own use, does this money represent money that you need to pay the rent, pay your bills and buy milk for the cat? Or is this money simply play money, money that if it were in your pocket, you'd blow on the tables in Las Vegas? If it's money you need, you should never had bought stocks with it, any stocks, not just PFE. At an advanced age, you want "guaranteed" income, not growth or value returns. Your money should be in fixed instruments. If, on the other hand, the PFE money is to be left to heirs, then the question becomes, what would they do with the money? Do they need it now? If so, stocks ain't the way to go. The market could go into a secular bear cycle at any moment, and that cycle could last for years. If the money is there for your heirs' future use, say their retirement needs or maybe to pay for college for a grandchild, then maybe there's enough time to wait for the price of the stock to recover.
What's your tolerance for risk? If the answer is low, then sell the darned stock now, take your lumps and be done with it. Once burned, twice smart or something like that. Rationalize the loss to yourself, whatever it takes to live with it. We all make investing mistakes. Typically, our mistakes are called "long term holds". <gg>
Getting serious again, if the price of PFE is affecting your sleep patterns, then just sell it on its next rally.
I don't expect you to answer these questions in a public forum. They're questions that you ask yourself. Don't lie to yourself, or try to fool yourself. The only one who gets hurt is you.
Best wishes...
EK!!! |
